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States pvt hospitals may have to pay VAT for medicines
September, 03rd 2014

If the Commercial Tax Department in the state has its way, then medical bills of indoor patients undergoing treatment in major private hospitals will go up, thanks to a move to levy value added tax (VAT) on medicines.

In fact, the department has already asked as many as 39 private hospitals to furnish account details of past three years for scrutiny.

Irked by this decision, the hospitals plan to fight it out on grounds of differential interpretation of legal provisions in this regard. Their argument is that the medicines given to patients are for treatment and not sold to them, so there should be no VAT imposed on these medicines.

“The medicines are given as a part of the treatment. They, in no way, amount to separate and independent sales. Therefore, the hospitals are not liable to pay the tax on consumption of medicines in such way,” said the officials of Association of Healthcare Providers in India in a statement.

However, the department is adamant. “Yes, we have been carrying out inquiries and sought the accounts records from prominent hospitals in Ahmedabad, Rajkot, Jamnagar and Bhavnagar among other places for a period of the past three years,”said Bhargav Mankad, additional commissioner in commercial tax department, on Monday.

Of the 39 hospitals that are under the state government’s scanner, 19 are in Ahmedabad, Mankad informed. AHSPI director-general Dr Girdhar Gyani said it was true that the department was going ahead with its plans of levying VAT on medicines given to indoor patients, the association would continue its resistance as “it is a matter open to interpretation that cannot be taken up arbitrarily”.

Neeraj Lal, secretary of AHSPI and Chief Operations Officer of Sunshine Global Hospital, Surat, said that a delegation will meet state finance minister Saurabh Patel on Tuesday to sort out the issue. “AT on medicines given to indoor patients is sought to be levied only on Gujarat. It is not in force in any other state in the country,” Lal said. He said the department was taking the issuance of medicines to indoor patients as part of contract of sale, “whereas in effect, it is contract of services … right from the stage of diagnosis, accommodation, treatment and medicines to patient, which cannot be considered ‘sale”.

 
 
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